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(Legal) Credit Card Hacks

How to maximise using your credit card

Have you been iffy about getting a credit card for yourself for the longest time? Does the idea of running credit scare you? I know it did me for the longest time. Until such time that a bank actually offered me one without annual fees forever, then I thought, well, if it’s just going to be there without cost, why not give it a shot?

Before doing so, I wanted to do research on how this all works and how it will help me in the future?

This mostly applies in the Philippine context and I wanted to share my learnings specially to those who have yet to understand how credit cards work. 

Make sure the terms and conditions actually stipulate “no annual fee forever”

Some banks are and will be very sly about “no annual fee” with a disclaimer hidden away in the T&Cs saying *for the first year; and that subsequent years “will be subject for approval.”

This only means that they’ll consider waiving your annual fee if you used your credit card for a “reasonable amount” for the year. The “amount” to be spent depends on your credit limit. The actual amount, however, will not be disclosed and will be based on the officer charged with reviewing your account.

Your credit card should be as good as cash

Have you ever noticed in some stores that paying in cash means there is a “discount” on your product compared to paying with a card? This extra fee should be shouldered by the store for availing of the service of the bank that provided them the option to receive credit cards. 

In banking terms, this is called a surcharge and shouldn’t have been placed to bill the customer. What you can do is to ask the store to place the surcharge or the extra cost on your receipt as proof that you, in fact, paid for the service, and have them tag this cost as “surcharge.”

Call your bank and have this reported. The bank should be able to reverse the surcharge in your credit card bill.

Some banks offer “minimum credit balance payments”

How this works on your credit card is that if, say, you spent 1000 on something, they will offer for you to only pay a minimum of 200, for example. The 800 can be paid “staggered” through the next billing cycle with interest, of course.

Even with that said;

Pay in full every time

Or opt in for the zero installment plans offered during purchases in partner stores and establishments. The 5% finance charges on offer may look as if you’re paying for the convenience; while that is true, imagine 12 of these or delay an entire year with 5% each and watch the bills pile up even before you can say “cut my credit card.” Remember the 5% finance charge is based on your average balance and not the end amount.

On top of that:

Pay your credit card bills on time

“Like no duh!” you say; but many actually delay credit card bills in lieu of other things they have to pay or are waiting for salary to come in. The late fees incurred in your account are placed on top of your balance which goes back to the finance charges mentioned earlier. Further delaying payments will only mean another thing to pay later on.

Use the “dame dos” mentality

This is something I learned while I was really young when a teacher was talking about the history of the golden age of Argentina. The rich people of Argentina, when shopping, would usually say “dame dos” or “give me two” of whatever they were purchasing, from shirts all the way to cars.

No, I’m not telling you to buy two of everything you wish to buy. Rather, for purchases greater than half your month’s income, compute as if you didn’t have a credit card right now; will you be able to purchase two of the same item you’re looking to buy right now? If the answer is yes, go ahead. Otherwise, it’s best to wait until you have enough actual spending power of buying two of the same right now before actually going for it.

How does this work? The extra money is meant as a buffer for bills, food, utilities, among other things you’re looking to pay for. This is all considering you’re not the breadwinner for a family of five, of course.

Finally,

There’s no such thing as going to jail for not being able to pay your credit card bills

This is something a former friend of mine told me about working in finance:

The short of the story is that, if you find yourself unable to pay the full amount of your credit card, make an arrangement with your bank’s collector. The thought process behind this is that the collectors will be more than willing to settle with what you have right now rather than having no money to recover from your spending spree.

Yes, this will mean bad credit for you, mind you, this is a record that can be shared to other banks.

Just don’t sign or submit promissory notes or IOUs to the collector that you will pay at a certain date since this actually violates a law if you do, in fact, fail to pay your debt under estafa by means of deceit and is punishable by law where the bank can sue you for damages.

Banks and credit cards during the pandemic

Companies offering credit card services actually want and need you to pay what you owe them and will be willing to afford you some flexibility should you have found yourself without a job or source of income. It’s worth every penny to call your provider and request for financial arrangements that will be favourable for both parties.

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